BILL ANALYSIS Ó
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THIRD READING
Bill No: AB 2293
Author: Bonilla (D)
Amended: 8/26/14 in Senate
Vote: 21
SENATE ENERGY, UTIL. & COMMUNIC. COMM. : 10-0, 6/17/14
AYES: Padilla, Fuller, Block, Cannella, Corbett, De León,
DeSaulnier, Hill, Pavley, Wolk
NO VOTE RECORDED: Knight
SENATE INSURANCE COMMITTEE : 9-1, 6/25/14
AYES: Monning, Corbett, Correa, DeSaulnier, Mitchell, Nielsen,
Roth, Torres, Vidak
NOES: Lieu
NO VOTE RECORDED: Gaines
SENATE APPROPRIATIONS COMMITTEE : 5-1, 8/14/14
AYES: De León, Hill, Lara, Padilla, Steinberg
NOES: Gaines
NO VOTE RECORDED: Walters
ASSEMBLY FLOOR : 71-0, 5/27/14 - See last page for vote
SUBJECT : Transportation network companies: insurance coverage
SOURCE : Association of California Insurance Companies
Personal Insurance Federation of California
DIGEST : This bill, beginning July 1, 2015, amends the
Passenger Charter-Party Carriers' Act to require liability
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insurance coverage for transportation network companies (TNCs)
and their drivers.
Senate Floor Amendments of 8/22/14 revise the insurance coverage
requirement and related duties of TNCs.
ANALYSIS :
Existing law:
1.Authorizes the Public Utilities Commission (PUC) to regulate
various transportation services, including charter-party
carriers of passengers, defined as persons engaged in the
transportation of others by motor vehicle for compensation on
a prearranged basis over any public highway, but not including
taxicabs regulated by local agencies.
2.Requires that the PUC decisions specify different insurance
requirements for categories of charter-party carrier vehicles
depending on seating capacity and use, including $750,000
commercial liability insurance for up to seven passengers,
$1.5 million for up to 15 passengers, and $5 million for 16 or
more passengers.
3.Requires every city or county to regulate taxicabs with
seating capacity for up to eight passengers that are operating
in their jurisdictions.
4.Requires every owner of a vehicle used in the transportation
of passengers for hire not regulated by the PUC, including
taxicabs, to maintain liability insurance of at least $15,000
for death and personal injury, $30,000 for death or injury of
two or more persons, and $5,000 for property damage (15/30/5),
all per incident.
5.Requires personal automobile insurance with minimum liability
coverage of 15/30/5 and excludes coverage for any commercial
use of a vehicle under a personal automobile insurance policy.
6.Requires liability insurance for nonprofit ridesharing
vehicles, which are exempt from charter-party carrier
regulations, to be no less than three times the amount
required for noncommercial vehicles.
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7.Authorizes the PUC to enforce laws and regulations applicable
to charter-party carriers, conduct inspections and
investigations, suspend or revoke permits, impound vehicles,
and impose fines and misdemeanor penalties.
Existing PUC decision:
1.Establishes TNC as a new category of charter-party carriers
subject to its jurisdiction and defines a TNC as an
organization operating in California that provides prearranged
transportation services for compensation using an
online-enabled application (App) or platform to connect
passengers with drivers using their personal vehicles.
2.Requires each TNC to maintain commercial liability insurance
policies providing not less than $1 million coverage per
incident involving a vehicle and driver while "providing TNC
services."
This bill:
1.Requires a TNC to disclose in writing to participating
drivers, as part of its agreement with those drivers, the
insurance coverage and limits of liability that the TNC
provides, as specified.
2.Requires a TNC to also disclose in writing to participating
drivers, as part of its agreement with those drivers, that the
driver's personal automobile insurance policy will not provide
collision or comprehensive coverage for damage to the vehicle
used by the driver from the moment the driver logs on to the
TNC's App or platform to the moment the driver logs off the
transportation network company's App or platform.
3.Provides that the following requirements will apply to TNC
insurance from the moment a participating driver accepts a
ride request on the TNC's App or platform until the driver
completes the transaction on the App or platform or until the
ride is complete, whichever is later:
A. TNC insurance shall be primary and in the amount of $1
million for death, personal injury, and property damage.
The requirements for the coverage required may be satisfied
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by any of the following:
(1) TNC insurance maintained by a participating
driver.
(2) TNC insurance maintained by a transportation
network company or a combination of both.
1.TNC insurance coverage provided shall also provide for
uninsured motorist coverage and underinsured motorist coverage
in the amount of $1million from the moment a passenger enters
the vehicle of a participating driver until the passenger
exits the vehicle. The policy may also provide this coverage
during any other time period, if requested by a participating
driver relative to insurance maintained by the driver.
2.Provides that the insurer, in the case of insurance coverage
provided shall have the duty to defend and indemnify the
insured.
3.Provides that a TNC may meet its obligations, as it pertains
to under and uninsured motorist, through a policy obtained by
a participating driver only if the TNC verifies that the
policy is maintained by the driver and is specifically written
to cover the driver's use of a vehicle in connection with a
TNC's App or platform.
4.Provides that following requirements shall apply to TNC
insurance from the moment a participating driver logs on to
the TNC App or platform until the driver accepts a request to
transport a passenger, and from the moment the driver
completes the transaction on the App or platform or the ride
is complete, whichever is later, until the driver either
accepts another ride request on the App or platform or logs
off the App or platform:
A. TNC insurance shall, be primary and in the amount of at
least $50,000 for death and personal injury per person,
$100,000 for death and personal injury per incident, and
$30,000 for property damage. The requirements for the
coverage required may be satisfied by any of the following:
(1) TNC insurance maintained by a participating
driver.
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(2) TNC insurance maintained by a TNC that provides
coverage in the event a participating driver's insurance
policy has ceased to exist or has been cancelled or the
participating driver does not otherwise maintain
insurance or a combination of both.
1.Provides that a TNC shall also maintain insurance coverage
that provides excess coverage insuring the TNC and the driver
in the amount of at least $200,000 per occurrence to cover any
liability arising from a participating driver using a vehicle
in connection with a TNC App or platform within the time
periods specified which liability exceeds the required
coverage limits.
2.Provides that the insurer providing insurance coverage shall
be the only insurer having the duty to defend any liability
claim arising from an accident occurring within the time
periods specified.
10.Provides that a TNC may meet its obligations, within the
specified time periods, through a policy obtained by a
participating driver only if the TNC verifies that the policy
is maintained by the driver and is specifically written to
cover the driver's use of a vehicle in connection with a TNC's
App or platform.
11.States that coverage under a TNC insurance policy shall not
be dependent on a personal automobile insurance policy first
denying a claim nor shall a personal automobile insurance
policy be required to first deny a claim.
12.Provides that in every instance where TNC insurance
maintained by a participating driver to fulfill the insurance
obligations has lapsed or ceased to exist, the TNC shall
provide the coverage required beginning with the first dollar
of a claim.
13.Provides that during the period of time from the moment a
participating driver in a TNC logs on to the TNC App or
platform until the driver logs off the online-enabled
application or platform or the passenger exits the vehicle,
whichever is later, all of the following shall apply:
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A. The participating driver's or the vehicle owner's
personal automobile insurance policy shall not provide any
coverage to the participating driver, vehicle owner, or any
third-party, unless the policy expressly provides for that
coverage during the period of time to which this
subdivision is applicable, with or without a separate
charge, or the policy contains an amendment or endorsement
to provide that coverage, for which a separately stated
premium is charged.
B. The participating driver's or the vehicle owner's
personal automobile insurance policy shall not have the
duty to defend or indemnify for the driver's activities in
connection with the TNC, unless the policy expressly
provides otherwise for the period of time to which this
subdivision is applicable, with or without a separate
charge, or the policy contains an amendment or endorsement
to provide that coverage, for which a separately stated
premium is charged.
14.Requires a TNC or its insurer, in a claims coverage
investigation, to cooperate with insurers that are involved in
the claims coverage investigation to facilitate the exchange
of information, including the provision of dates and times at
which an accident occurred that involved a participating
driver and the precise times that the participating driver
logged on and off the TNC's App or platform.
15.Requires the PUC and the Department of Insurance (CDI) to
collaborate on a study of TNC insurance to assess whether
coverage requirements are appropriate to the risk of TNC
services in order to promote data-driven decisions on
insurance requirements, and shall report the findings of this
study to the Legislature no later than December 31, 2017.
16.Provides that a TNC shall not disclose to a third-party any
personally identifiable information of a transportation
network company passenger unless one of the following applies:
A. The customer knowingly consents.
B. Pursuant to a legal obligation.
C. The disclosure is to the PUC in order to investigate a
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complaint filed with the PUC against a TNC or a
participating driver and the PUC treats the information
under confidentiality protections.
17.Defines "transportation network company (TNC)" to mean an
organization, including, but not limited to, a corporation,
limited liability company, partnership, sole proprietor, or
any other entity, operating in California that provides
prearranged transportation services for compensation using an
online-enabled application or platform to connect passengers
with drivers using a personal vehicle.
18.Defines "participating driver" or "driver" to mean any person
who uses a vehicle in connection with a TNC's App or platform
to connect with passengers.
19.Defines "transportation network company insurance" to mean a
liability insurance policy that specifically covers
liabilities arising from a driver's use of a vehicle in
connection with a TNC's App or platform.
20.States that these provisions commence July 1, 2015.
Background
Smartphones Transform How to Get a Ride . The Internet and
proliferation of smartphones have transformed many aspects of
life and commerce, including how to get a ride. Instead of
hailing a cab, or calling a reservation car service, a growing
number of consumers are using new app-based services that
connect drivers with passengers. With GPS and geolocation
technology as the foundation of the business model, companies
such as Uber, Lyft, and RideShare enable customers to download
an app that alerts participating drivers in the area of the need
for a ride. Drivers with their TNC app turned on get a signal
on their smartphones and can accept or reject the ride request.
The customer can see photos of responding drivers and their
vehicles, as well as customer ratings of each driver and accept
or reject the driver. When a passenger and driver make a match,
the ride is provided, and payment is made electronically on the
smartphone, with drivers getting a portion.
App-based ride services were born in California and began
operation in the Bay Area in 2012. Uber, the largest ride
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service company, is now available in more than 100 cities in 35
countries and was recently valued at about $17 billion.
Drivers with these new services use their own vehicles and most
have other jobs. Lyft reports that 54% of its drivers have a
full-time job, 30% work part-time, with more than a third
driving less than five hours a week, and only 10% driving more
than 30 hours per week. Some drivers turn on their app and
accept riders in their spare time or focus on weekends and
evenings in busy entertainment districts when "surge" fares are
in effect. Uber has two models - Uber drivers who are licensed
limousine drivers, and UberX drivers using their own vehicles.
Many taxi drivers also are signing up with the new services to
supplement taxi income or switching fulltime to the new model.
Varied Public Safety Regulations for Different Transportation
Modes . The PUC regulates many types of transportation,
including "passenger stage corporations" and "charter party
carriers" that transport persons by motor vehicle for
compensation on a prearranged basis. The "Passenger
Charter-Party Carriers Act," first enacted in 1961, contains
numerous special provisions, exclusions, classifications, and
permits for a wide range of transportation modes including a
limousine with seating capacity up to eight passengers, a bus
with capacity up to 15 passengers, a large bus with 16 or more
passengers, as well as vehicles used for nonprofit ridesharing,
round-trip sightseeing, youth camps, farmworkers, motel guests,
hot air balloon ride passengers, school children, and more.
Different insurance and other requirements apply depending on
the size and use of vehicles and other factors.
Taxicabs are excluded from the definition of charter-party
carrier, with the key distinction being that charter-party
carrier transport must be prearranged through written contract
or telephone and not be through street hails. Thus, taxis are
exempt from PUC regulation and instead are regulated by cities
and counties. Airports also have regulations and permit
requirements for all types of vehicles.
The last major revision of the "Passenger Charter-Party Carriers
Act" was in 1990 in response to what news reports called a "Gold
Rush-like boom in the limousine industry" after the 1984
Olympics in Los Angeles when chauffer service proved profitable.
Taxis and licensed limousine operators called for more
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regulation and enforcement against "bandit" limousines that were
operating without a license and commercial insurance, and,
according to the Los Angeles Checker Cab Company, "represent a
threat to healthy competition in the transportation industry and
to public safety and welfare." Airports especially responded
with increased enforcement, claiming the PUC had abdicated its
enforcement.
PUC Begins Regulation of Transportation Network Companies . In a
September 2013 decision, the PUC began regulation of the new
app-based ride services. The PUC exercised its jurisdiction
over charter-party carriers, but created a distinct new category
called TNCs. In order to balance innovation, consumer choice,
and public safety, the PUC tailored specific new rules in
response to the introduction of new technology into an existing
industry. The decision requires TNCs to obtain a permit from
the PUC, conduct criminal background checks of drivers,
establish a driver training program, implement a zero-tolerance
policy on drugs and alcohol, conduct vehicle inspections, and
obtain authorization from airports before conducting any
operations on or into airport property. The decision also
requires each TNC to maintain commercial liability insurance
policies providing not less than $1 million per-incident
coverage for incidents involving vehicles and drivers "while
they are providing TNC services."
FISCAL EFFECT : Appropriation: No Fiscal Com.: No Local:
No
According to the Senate Appropriations Committee:
One-time costs of approximately $197,000 to the PUC (Special
Fund).
One-time costs of $25,000 to CDI (Special Fund).
The PUC has identified costs of approximately $79,000 for the
study, and about $118,000 for additional rule-making to bring
PUC regulations into conformance with statute. CDI indicates
expenses totaling $25,000 associated with the study.
SUPPORT : (Verified 8/27/14)
Association of California Insurance Companies (co-source)
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Personal Insurance Federation of California (co-source)
Allstate Insurance Company
American Insurance Association
California Airports Council
California App-Based Drivers Association
California Credit Union League
California Democratic Party
City of Los Angeles
Companies (NAMIC)
Companies (PADIC)
Independent Insurance Agents and Brokers of California
Liberty Mutual Insurance
Lyft
National Association of Mutual Insurance
Pacific Association of Domestic Insurance
Property Casualty Insurers Association of America
San Diego County Regional Airport Authority
San Francisco International Airport
San Francisco Metropolitan Transit Agency
State Farm
The Sullivan Group
The Surplus Lines Association of California
Uber Technologies, Inc.
United Policyholders
OPPOSITION : (Verified 8/27/14)
Google Inc.
Greater California Livery Association
San Francisco Cab Drivers Association
Taxicab Paratransit Association of California
The Internet Association
United Taxicab Workers
Veolia
ASSEMBLY FLOOR : 71-0, 5/27/14
AYES: Achadjian, Alejo, Bigelow, Bloom, Bocanegra, Bonilla,
Bonta, Bradford, Brown, Buchanan, Ian Calderon, Campos, Chau,
Chávez, Chesbro, Cooley, Dababneh, Dahle, Daly, Dickinson,
Eggman, Fong, Fox, Frazier, Beth Gaines, Garcia, Gatto, Gomez,
Gonzalez, Gordon, Gorell, Gray, Grove, Hagman, Hall, Harkey,
Roger Hernández, Holden, Jones, Jones-Sawyer, Levine, Linder,
Logue, Lowenthal, Maienschein, Mansoor, Medina, Melendez,
Mullin, Muratsuchi, Nestande, Olsen, Pan, Perea, John A.
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Pérez, Quirk, Rendon, Ridley-Thomas, Rodriguez, Salas,
Skinner, Stone, Ting, Wagner, Waldron, Weber, Wieckowski,
Wilk, Williams, Yamada, Atkins
NO VOTE RECORDED: Allen, Ammiano, Conway, Donnelly, Nazarian,
Patterson, V. Manuel Pérez, Quirk-Silva, Vacancy
JG:e 8/27/14 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
**** END ****
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